Life Insurance

Life insurance is a simple answer to a very difficult question: How will my family manage financially when I die? It’s a subject no one really wants to think about, but if someone depends on you financially, it’s one you cannot avoid. There are many types of life insurance, but for all of them the bottom line is the same: They pay cash to your family after you die, allowing loved ones to remain financially secure. Life insurance payments can be used to cover daily living expenses, mortgage payments, outstanding loans, college tuition and other essential expenses. And, importantly, the death-benefit proceeds of a life insurance policy are almost never subject to federal income taxes.

If you’ve worked hard to establish a solid financial framework for your family—investments, home equity, a savings plan, retirement accounts—life insurance is the foundation upon which it all rests. It can guard against the need for your loved ones to make drastic changes to future plans when you die. Certain types of life insurance even have a built-in cash-accumulation feature that can help you reach savings goals. Most Americans need life insurance, and many who already have it may need to update their coverage.

The most important part of buying life insurance is determining how much you need. Since everyone’s financial circumstances and goals are different, there is no rule of thumb to tell you how much to buy. But do you really need $250,000, $500,000, $1 million or more? Sounds like a lot of money, but imagine if one of those amounts had to pay for a funeral, retire credit card balances and other debts, and support your loved ones for many years to come. Would it be enough? How would you know?